They like things like Oracle in the enterprise world. This has almost nothing to do with the real world; the definition of “enterprise software” is “software that gets sold to a so-called enterprise”, and one of its major differentiating characteristics is that it is under much less pressure than other software to have any technical merit, as Kragen Sitaker observantly points out. (The other is that it costs far more than other kinds of software.)

Imagine traveling down a road and you come to a sign for the town called Burp. Finding the name a little strange you take a mental note of it. In the future discussions with your friends and co-workers you often refer to this town. Your friends and co-workers get a little puzzled when you mention Burp, but they never say anything. Several years later, you see a newspaper article about the town that you had passed through. The article tells the story about how a road maintenance worker used a letter 'B', instead of a letter 'M', when making a new road sign after the town of Murp (the real name) acquired several new subdivisions. The maintenance shop ran completely out of letter M's so he used a letter B. as a humorous substitute for the name Murp. Eventually the sign changed back to Murp, but the name stuck as Burp for thousands of travelers passing through.

Those of us on the journey to support, maintain, and use modern-day ERP systems, have found similar road signs in our travels. Some of the road signs that have caused some confusion over the years include: MRP, MRP II, ERP, and more recently: ERM. A graphical depiction of the evolution of modern-day ERP systems is shown in Figure 1. The earlier research in material requirements planning and related topics focused on four fundamental areas. These included: economic order quantity (EOQ), safety stock, bill of materials processing (BOMP), and work order management. These served as the construction cornerstones for emerging MRP systems to follow in the mid 1960's. These cornerstones had been in practice throughout industry since the turn of the century. What was the turning point in the mid 1960's that allowed these cornerstones to emerge into one system called MRP? The answer: the computer. The four acronyms covered in this article include:

How the computer changed everything! The computer began the journey into modern-day planning systems. The confusion started after the introduction of the computer. By 1975 enough MRP systems had been installed to begin the formation of MRP II systems. Confusion began with the introduction of MRP II. For the most part, there was a basic understanding that MRP II evolved out of MRP. The problem began with education and the generic definitions of MRP and MRP II. When students, consultants, practitioners, and educators started using the term MRP, it was unclear whether the discussion was about MRP or MRP II.

The definition of MRP as defined by the 9th edition of the APICS dictionary is: A set of techniques that uses bill of material data, inventory data, and the master production schedule to calculate requirements for materials. It makes recommendations to release replenishment orders for material. Further, because it is time phased, it makes recommendations to rescheduled open orders when due dates and need dates are not in phase. Time phased MRP begins with the items listed on the MPS and determines (1) the quantity of all components and materials required to fabricate those items and (2) the date the components and materials are required. Time phased MRP is accomplished by exploding the bill of material, adjusting for inventory quantities on hand or on order, and offsetting the net requirements by the appropriate lead times.

The definition of MRP II as defined by the 9th edition of the APICS dictionary is: A method for the effective planning of all resources of a manufacturing company. Ideally, it addresses operational planning in units, financial planning in dollars, and has a simulation capability to answer "what if" questions. It is made up of a variety of functions, each linked together: business planning, sales and operations planning, production planning, master production scheduling, material requirements planning, capacity requirements planning, and the execution support systems for capacity and material. Output from these systems is integrated with financial reports such as the business plan, purchase commitment report, shipping budget, and inventory projection in dollars. Manufacturing resource planning is a direct outgrowth and extension of closed loop MRP.

The definitions of MRP and MRP II are generally well accepted by students, consultants, practitioners, and educators. The lack of education was, and still is, our only real reason for confusing MRP with MRP II.

Remember BRP? It stands for: Business Resource Planning. When BRP came out in the early 90's, it really looked like it was going to stick. It fit nicely with business process reengineering. BRP did not last long. At about the same time ERP (Enterprise Resource Planning) came to age. Practitioners actively working with planning systems and keeping abreast of the changes, saw ERP as exactly the same thing as MRP II. The only difference was that the name had changed.

Life went along as normal until researchers and market analysts found out that certain sources had not properly defined what an ERP system really was. Some sources had defined an ERP system as: An accounting oriented information system that uses new technology such as graphical user interface, relational database, fourth generation language, computer-aided software engineering tools, and client/server architecture.

Some practitioners found this definition a little confusing. Whether talking about MRP II or ERP, these business planning tools may or may not include capabilities such as fourth generation language or relational databases. Technology is important, but it should not dominate the definition of an ERP system. A definition of an ERP system should include the functional silos needed to operate most businesses. Some of these business silos include: accounting, manufacturing, distribution, purchasing, sales, inventory, quality, etc...

A complete definition of an ERP system is defined as: ERP, standing for Enterprise Resource Planning, is a complete enterprise wide software solution. The ERP system consists of software support modules such as: marketing and sales, field service, product design and development, production and inventory control, procurement, distribution, industrial facilities management, process design and development, manufacturing, quality, human resources, finance and accounting, and information services. Integration between the modules is stressed without the duplication of information. ERP systems are an out growth of MRP II systems.

That sounds pretty good. The journey continues down the road of life satisfied with our definitions of planning systems when all of a sudden another road sign comes up for a town called ERM. Stopping to ask the residents for the definition of ERM, we learn it stands for Enterprise Resource Management. That sounds pretty nifty, or is it? What is the definition of ERM? That's a real good question, because at the time of this writing, it had already been badly mangled by some sources.

Despite all the different definitions that have emerged for ERM, one common concept exists for them all. That concept is that ERM is an outgrowth of ERP. Is ERM the same to ERP as ERP was to MRP II? The answer is no.

Some of the definitions that have emerged directly define ERM as being a software system. ERM stands for Enterprise Resource Management, the key words of Resource and Management can be stressed. Management and software are not the same! Software is a tool to aid in management, not replace it! Enterprise Resource Management can be thought of as the tools and techniques for managing the resources of an enterprise. ERP is only one of the many resources to be found in any enterprise.

Looking at Figure 2, the ERM model is defined for the first time. Towards the center of the circle is the traditional ERP model consisting of all the various support functions of an ERP system. Moving towards the outer edges of the circle is the integration with the software for the various activities that occur inside that function. A function is defined as marketing and sales, field service, product design, etc...

The activities that occur inside each function include: management, decisions, training, people, documentation etc... This process of combining the ERP system with functional activities of each module makes up the ERM model.

How does a company's use of a software planning tool determine if it is ERM or as ERP? If a company uses a software package for the purpose of replacing a legacy system without concern of how it will integrate with functional activities, then the software works as an ERP system. If a company uses an ERP system with the intention of using the ERP system to support and integrate with the various activities of the various modules, throughout the enterprise, then an ERM solution will be found.

The definition of an ERM system: ERM standing for Enterprise Resource Management, is a complete enterprise wide business solution that consists of an ERP system and functional activities occurring within each module of, and around, the ERP system. The ERP system consists of software support modules such as: marketing and sales, field service, product design and development, production and inventory control, procurement, distribution, industrial facilities management, process design and development, manufacturing, quality, human resources, finance and accounting, and information services. The functional activities occurring within each module consists of: management, decisions, training, documentation, communication, people, etc... The ERP modules and functional activities must exist in harmony to become an ERM solution. The integration/interface points of the ERP system bind the entire ERM solution together.

The ERM model is not a passing fad. The ERM model has existed since the mid 1970's, and was clearly recognized, but never received a formal definition. As long as there are companies that use ERP systems and perform activities within functional modules, the ERM model will exist. Whether or not the term ERM will become another fatality like BRP is yet to be seen. With proper education and nurturing, practitioners and educators will be able to avoid confusion that occurred with MRP and the confusing definitions of ERP systems.

In conclusion, the origin of MRP systems occurred in four fundamental areas that created material planning systems. More complex and functional systems later evolved into Manufacturing Resource Planning (MRP II). The natural outgrowth of MRP II was ERP systems. When MRP II systems were identified as ERP solutions they were almost identical. Confusion occurred along the way as ERP systems received poor definitions. ERM has recently emerged as the next evolutionary step of ERP systems. ERM will not suffer the same confusing fate of its ancestors with proper education and nurturing. And let us not forget the town called Burp!

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